High Gasoline Prices to Ease This Fall

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Hurricane Ida hit U.S. oil production and refineries hard. But its impact on gasoline prices has been muted. The storm closed a significant amount of offshore oil production in the Gulf of Mexico when it passed, and knocked out power to many of the region’s refineries. However, the national average price of regular unleaded has risen only a few pennies in response. At $3.19 per gallon, the national average is up three cents from a week ago. And now, with Labor Day weekend over and the summer travel season coming to a close, we expect gas prices to slip a bit on weaker demand. The annual switchover from summer-blend gas to cheaper winter-blend formulations should also help bring prices down. Diesel, now averaging $3.30 per gallon, is likely to hold fairly steady as autumn begins.

Oil prices remain rangebound, with benchmark West Texas Intermediate recently trading near $68 per barrel. We look for WTI to remain in the $65 to $70 range as summer comes to a close, and then trend lower this autumn, unless there is a major supply outage somewhere in the world. Economic growth has rebounded sharply from last year’s plunge, but COVID-19 continues to D on demand in some regions. Plus, OPEC and its partners are steadily restarting production that they took offline last year, which should help keep markets adequately supplied.

Keep an eye on natural gas prices, which have soared in recent weeks on supply concerns. Gas stockpiles in underground storage are lower than normal for this time of year, and demand has been strong in parts of the country that depend heavily on gas-fired power plants for electricity during heat waves. Low supply and strong demand have pushed the benchmark gas futures contract to $4.60 per million British thermal units, near the highest level in years. Whether those higher prices will last depends heavily on autumn weather. Mild temperatures would allow stockpiles to build up due to low demand. Unseasonably cold weather would further strain supplies. In the latter scenario, consumers who heat with gas will start to feel the pain of high gas bills when they start firing up their furnaces.